This is the root of the problem. Huge election costs spawn corruption in the country. The maximum amount a candidate can legally spend, after the increase in the limits in February last year, is Rs 40 lakh for a Lok Sabha seat and Rs 16 lakh for an Assembly seat. It is an open secret that the actual spend by most candidates - and by political parties on them - is usually 10 to 20 times that. Little surprise then that, once elected, the focus usually is not just to get the "investment" back but also to hoard enough to fund another couple of elections. The National Commission to Review the Working of the Constitution, 2001, put it aptly: "Electoral compulsions for funds become the foundation of the whole superstructure of corruption." Any fight against corruption is meaningless if the country's electoral system is not first cleansed.
Full state funding of elections, ideally, or even partial, should largely address the problem. Denmark, considered the least-corrupt country, has state funding. If politicians do not depend on funds from shady businessmen and their ilk, they would not be prone to graft. However, the debate on state funding has been going on for a long time without any tangible outcome. In the interim, Prime Minister Manmohan Singh could make it mandatory for political parties to have their accounts audited annually, and placed in the public domain. More importantly, there should be full details of every rupee contributed and how it was spent. This would vastly reduce the play of black money in electioneering. The Election Commission, since 1998, has been pressing for a legislation that would make financial transparency mandatory for political parties, but for obvious reasons, this has fallen on deaf ears of almost all our politicos.
Similarly, it may be a good idea for all candidates standing for election to make their most recent tax returns public, and keep doing so annually once elected. At present, candidates declare their assets to the Election Commission before the elections. And, Union Ministers declare their assets to the Prime Minister, which, however, is a recent annual phenomenon.
Politically Exposed Persons (PEPs)
Keeping tabs on the politician's financials may not be sufficient. Close family members and people closely associated-personally or professionally-with them also need to be tracked as they may be used as fronts to launder money obtained through graft. Also, even if a politician is honest, there is no guarantee someone close to him will not misuse that proximity. The recent allegations of financial misdemeanours against BJP chief Nitin Gadkari or the charge of a sweet deal between Robert Vadra, son-in-law of Congress President Sonia Gandhi, and realty major DLF are cases in point.
Globally, politically exposed persons (PEP) are identified as a category by banks in the context of containing money laundering. These are not just politicians and those close to them, but also senior officials in the military, the judiciary, the bureaucracy and so forth. Their accounts are generally subjected to enhanced monitoring on an ongoing basis. The Reserve Bank of India categorises PEPs as requiring "very high level of monitoring" in the context of KYC (know your customer) guidelines and anti-money laundering standards, but limits it to people of foreign origin. It may be a good idea to have a list of Indian PEPs that would include the kin of all important officials-elected or not-with the Income Tax Department, the banking system and other enforcement agencies keeping a tab on them.
Belling the fat cats
The Licence-Raj era may be over, but the government still has enormous powers in policy-making, which if slightly tweaked can lead to a windfall for a particular business group or sector. It is a truism that politicians alone cannot be blamed, private players who pay bribes for special favours, are also equally responsible for corruption. The book Saving Capitalism from Capitalists (2004), co-authored by Raghuram G Rajan - the present economic advisor to the Finance Ministry - points out that powerful private interests often try to leverage the power of government regulation in their own interests and at the expense of public interests. The various Comptroller and Auditor-General reports only validate that point. The allocation of natural resources-from land to 2G telecom spectrum to mines-has appeared to be arbitrary or non-transparent or questionable.
There have to be serious disincentives to combat graft. The Prevention of Corruption Act 1988 does provide for a jail-term ranging from six months to five years for both abetting and taking bribes. But, clearly, that does not seem to be a sufficient disincentive. Certainty of punishment should become a must, and probably longer sentences. Some states have taken the lead in coming out with innovative legislations. The Orissa Special Courts Act of 2006 and Bihar Special Courts Act of 2009 are unique laws that allow these two states to confiscate the properties of corrupt public servants. Similar legislation at a national level could well act as a deterrent.
Also, in the United States, those indicted for economic offences face prison terms of 40 years, and even 150 years. The US Foreign Corrupt Practices Act (FCPA) of 1977 prohibits corrupt payments by US firms to foreign officials to obtain or hold on to business. India should have a similar legislation, though that should mainly cover domestic practices.
To be fair, the government has already drafted the Public Procurement Bill 2011 to ensure transparency in procurement for public enterprises. The Bill seeks to ensure that all government purchases of more than Rs 50 lakh takes place through a transparent bidding process. It will debar bidders found engaged in corrupt practices. More importantly, anyone lobbying, influencing an official, collusive bidding and so forth will also be given a jail term extending to five years, or a fine that may extend to Rs 50 lakh or 10 per cent of the value of procurement, whichever is higher, or with both.
The scope for sleaze could also shrink if e-governance was implemented rigorously. Digitalisation of all government records would bring in a lot of transparency. A dozen states, starting with Madhya Pradesh have passed the Right to Public Services Act, 2010 by which designated public officials have to deliver within a stipulated time frame. They cannot use deliberate delays any more as a means of extracting bribes. The Centre, too, has drafted The Citizens Right to Grievance Redress Bill, 2011, but needs to push through this legislation too, fast.
Some of the most sophisticated scams, whether corporate or public, have been exposed by whistleblowers. But whistleblowers in India are hardly protected. Anyone familiar with how the government works knows that it is not difficult to find out the identity of a whistleblower. Satyendra Dubey, the project director at the National Highways Authority of India (NHAI), was killed in 2003. He had secretly reported to the Prime Minister's Office on corruption in the Golden Quadrilateral road construction. The Whistleblower's Bill 2010, pending in Parliament, proposes to protect whistleblowers in the government. It empowers the Central Vigilance Commission (CVC), for instance, to hand down tough penalties to people revealing the identities of whistleblowers or threatening them. However, if there are no proper systemic reforms accompanying the Act, then whoever blows the whistle will continue to get victimised.
More importantly, it is important to get whistleblowers in private sector too under proper legislative cover. This can expose scams in their infancy. In the United States, after the scandals of Enron and WorldCom, the American Congress passed the Sarbanes-Oxley Act of 2002, providing extensive protection to whistleblowers in publicly traded companies. The penalties include a fine or imprisonment up to 10 years, or both. The rules of the Securities and Exchange Board of India do provide some kind of protection for whistleblowers in listed companies. However, unlisted companies also need to be brought in.
Another means of tackling corruption would be to involve the people by incentivising them. The United States False Claims Act empowers the citizen to file a civil suit on behalf of the government against a fraud committed by any person or entity (in collusion with a public servant). The loss to society could be monetary or non-monetary in nature, such as in poor quality of goods and services, pollution and so on. The citizen gets a percentage of the compensation. The Second Administrative Reforms Commission did recommend many such provisions, but the government is yet to act on many of them.
Finally, it is important that any corruption that is reported is properly investigated, prosecuted and sentenced accordingly. But, there is a problem on all the three fronts. For instance, the Central Bureau of Investigation (CBI), though technically under the CVC, is often seen as the handmaiden of the government in power. The government holds the strings when it comes to appointments, transfers and other administrative issues of the CBI officials. It was only when, for instance in the 2G spectrum scam, the CBI was monitored by the Supreme Court that the probe really got going. Similarly, the CVC's mandate is limited to "advise and guide central government agencies in the field of vigilance." It can do little if there is no follow-up after it recommends appropriate penal action. India's Serious Fraud Investigation Office (SFIO) was created in 2003, but it can only probe offences under the Companies Act. The Second Administrative Reforms Commission has suggested the agency be subsumed into a new SFO, attached to the Cabinet Secretariat, and having powers to investigate and prosecute all such cases in special courts constituted for that purpose.
The creation of an ombudsman through the pending Lok Pal Bill could solve most problems on the investigation and prosecuting fronts, provided that if and when it is formed, it is given real powers. Though it is likely that the Centre may exclude the setting up state Lokayuktas from the current Bill, certain Lokayuktas such as the one in Karnataka have shown how the institution can hold a government accountable. All these, of course, have to be accompanied by judicial reforms that make it both more accountable as well as streamline the system so that there is no overburdening of cases, and there is no question of delayed justice.
It is not that there is any shortage of ideas to combat corruption. All that is lacking is political will.